Abstract:
Tax compliance remains to be a very crucial subject to researchers in many parts of the world
across the globe. Despite the increasing need to raise the level of revenue collection,
developing countries still face the challenges of low tax compliance. Capital gains taxes for
practical and political reasons are perpetually riddled with exemptions and exceptions making
them complicated to administer and to comply with. The big complication is determining the
true capital gain net of inflation after netting out the purchase price and the cost of
maintenance and investment in the asset over the years. The main objective of this study was
to establish the determinants of Capital Gains Tax performance among property owners in
Nakuru City, Kenya. The specific objectives were to determine the effect of taxpayers‟
sensitization, systems automation and taxpayers‟ perception on capital gains tax performance.
This study was built on the benefit theory of taxation, universal theory of acceptance and use
of technology and social influence theory. The study adopted explanatory research design.
The target population was 6,231 property owners with movable and immovable properties in
Nakuru City where a sample of 376 property owners was drawn. Primary data collection was
employed in the study using structured questionnaires. The study used descriptive statistics
and multiple linear regression analysis to establish the effect of the determinants of capital
gains tax performance. The study findings showed that taxpayers‟ sensitization, systems
automation and taxpayers‟ perception had a statistically positive significant effect on capital
gains tax performance with evidence of beta values of: taxpayers‟ sensitization (β1=0.357,
p=0.000<0.05),systems automation (β2=0.261, p=0.003<0.05) and taxpayers‟ perception
(β3=0.285, p=0.001<0.05).The study results concluded that taxpayers‟ sensitization, systems
automation and taxpayers‟ perception had significant influence on capital gains tax
performance. Based on the findings, the study recommends that KRA should pay more
attention on taxpayers‟ sensitization that contributes to online payment process being
efficient in payment of taxes. The study therefore suggests that future research should be
conducted to investigate effect of other variables such as cost and tax knowledge on Capital
Gains Tax performance.
